Retailing, Franchising, and Consumerism Business Intelligence in China

China's Little Sheep Publishes First Annual Report Since Listing

Chinese hotpot chain Little Sheep has published its first annual report since it was listed on the Hong Kong Stock Exchange of Hong Kong on June 12, 2008.

Though affected by the global financial crisis and the decline of consumer confidence in China, Little Sheep still has an impressive report for 2008. The company's total revenue increased by 34% year-on-year to CNY1.272 billion while its net profit increased by 41.2% to CNY128.7 million.

Little Sheep's report showed that a major part of its revenue was attributable to its directly-managed restaurants. In 2008, those directly-managed restaurants realized revenues of CNY1.011 billion, an increase of 34.6% compared with the same period of 2007. During the period, the average consumption by consumers increased by 5.4% and the sales of its individual outlets increased by 10%. In addition, the sales of Little Sheep's food products contributed CNY239.9 million to its total revenue, a year-on-year increase of 40.7%.

However, the revenue of Little Sheep's franchise restaurants was a mere CNY18.9 million, a year-on-year decrease of 28.4%.

According to Li Lichan, the managing director of Little Sheep, the company will focus on directly-managed restaurants in first and second-tier Chinese cities and will not develop franchise restaurants in these markets.

Li revealed that by February 28, 2009, Little Sheep had opened 376 hotpot chain restaurants in China, of which, 130 are directly-managed restaurants and 246 are franchise ones. In 2009, the company plans to open 40 new restaurants nationwide with an investment of CNY2 million to CNY3 million each and these new restaurants will mainly be located in first-tier cities such as Beijing, Shanghai, and Shenzhen.

Wang Daizong, executive director and CFO of Little Sheep, said the company plans to invest CNY170 million in 2009 to open new restaurants and to renovate existing restaurants. The amount in 2008 was CNY155 million.

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